6-1 BUS7000 Organizational Behavior &Theory Week 7 Dr Jenne Meyer 1

13-2 Article Analysis 2

Designing Organizational Structures McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

13-4 Merritt’s Bakery’s Evolving Organizational Structure Merritt’s Bakery has grown over the years, and throughout this growth the Tulsa, Oklahoma, company has adapted its organizational structure.

13-5 Organizational Structure Defined Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities Relates to many OB topics (e.g. job design, teams, power, work standards, information flow)

13-6 Division of Labor  Subdividing work into separate jobs assigned to different people  Division of labor is limited by ability to coordinate work  Potentially increases work efficiency  Necessary as company grows and work becomes more complex

13-7 Coordinating Work Activities 1. Informal communication Sharing information, forming common mental models Good for flexibility, nonroutine and ambiguous situations Easiest in small firms Larger firms apply informal communication through - Liaison roles - Integrator roles - Concurrent engineering

13-8 Coordinating Work Activities 2. Formal hierarchy Direct supervision Assigns legitimate power to manage others Necessary in most firms, but has problems 3. Standardization Standardized processes (e.g., job descriptions) Standardized outputs (e.g., sales targets) Standardized skills (e.g., training)

13-9 Elements of Organizational Structure Span of Control Centralization Department- alization Formalization Elements of Organizational Structure

13-10 KenGen’s Flatter Structure KenGen, Kenya’s leading electricity generation company, reduced its hierarchy from 15 layers to just 6 layers. “This flatter structure has reduced bureaucracy and it has also improved teamwork,” explains KenGen executive Simon Ngure

13-11 Span of Control  Number of people directly reporting to the next level Related to coordination through direct supervision  Wider span of control possible when: 1. Other coordinating mechanisms are present 2. Routine tasks 3. Low employee interdependence 13-11

13-12 Tall vs Flat Structures  As companies grow, they: Build a taller hierarchy Widen span, or both  Problems with tall hierarchies Overhead costs Worse upward information Focus power around managers, so staff less empowered 13-12

13-13 Centralization and Decentralization  Centralization -- Formal decision making authority is held by a few people, usually at the top  Decentralization increases as companies grow  Varying degrees of centralization in different areas of the company Example: sales decentralized; info systems centralized Upper Mgt Middle Mgt Front line Supervisory Upper Mgt Middle Mgt Front line Supervisory Upper Mgt Middle Mgt Front line Supervisory ProductionSales Information Systems = locus of decision making authority

13-14 Formalization  The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms.  Formalization increases as firms get older, larger, and more regulated  Problems with formalization Reduces organizational flexibility Discourages organizational learning/creativity Reduces work efficiency Increases job dissatisfaction and work stress

13-15 TAXI’s Organic Structure TAXI, Canada’s creative agency of the decade, has an organic structure that relies on small teams, low formalization, and decentralized decision making. “We needed a flexible infrastructure, able to move with the pace of change,” says co-founder Paul Lavoie (right in photo with CEO Rob Guenette).

13-16 Mechanistic vs. Organic Structures  Mechanistic Structure Narrow span of control High formalization High centralization  Organic Structure Wide span of control Low formalization Decentralized decisions

13-17 Effects of Departmentalization Specifies how employees and their activities are grouped together Three functions: 1. Establishes chain of command 2. Creates common mental models, measures of performance, etc 3. Encourages staff to coordinate through informal communication

13-18 Organizes employees around specific knowledge or other resources (e.g., marketing, production) CEO FinanceProduction Marketing Functional Organizational Structure

13-19 Evaluating Functional Structures  Benefits Economies of scale Supports professional identity and career paths Easier supervision  Limitations More emphasis on subunit than organizational goals Higher dysfunctional conflict Poorer coordination -- requires more controls

13-20 Organizes employees around outputs, clients, or geographic areas Divisional Structure CEO HealthcareLightingProducts Consumer Lifestyle

13-21 Divisional Structure  Different forms of divisional structure Geographic structure Product structure Client structure  Best form depends on environmental diversity or uncertainty

13-22 Globally Integrated Enterprise  Fewer geographic divisions because: Less need for local representation Reduced geographic variation More global clients  Globally integrated enterprise Connects work processes around the world rather than replicating them within each country or region Functional heads are geographically distributed Firm’s “home” country is no longer focus of business

13-23 Evaluating Divisional Structures  Benefits Building block structure -- accommodates growth Focuses on markets/products/clients  Limitations Duplication, inefficient use of resources Specializations are dispersed--silos of knowledge Revising divisional structure emphasis produces politics and conflict among executives

13-24 Team-Based Structure  Self-directed work teams  Teams organized around work processes  Typically organic structure  Usually found within divisionalized structure 13-24

13-25 Evaluating Team-Based Structures  Benefits Responsive, flexible Lower admin costs Quicker, more informed decisions  Limitations Interpersonal training costs Slower during team development Role ambiguity increases stress Problems with supervisor role changes Duplication of resources

13-26 Audio Dept Leader Software Dept Leader Art Dept Leader Game1 Project Leader Game2 Game3 Matrix Structure (Project-based) CEO Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit

13-27 Evaluating Matrix Structures  Benefits Uses resources and expertise effectively Improves communication, flexibility, innovation Focuses specialists on clients and products Supports knowledge sharing within specialty Solution when two divisions have equal importance  Limitations Increases goal conflict and ambiguity Two bosses dilutes accountability More conflict, organizational politics, and stress

13-28 Core Firm (USA) Product development partner (France) Call center partner (Philippines) Accounting partner (USA) Package design partner (UK) Assembly partner (China) Network Organizational Structure Alliance of firms creating a product or service Supporting firms beehived around a “hub” or “core” firm

13-29 Evaluating Network Structures  Benefits Highly flexible Potentially better use of skills and technology Not saddled with same resources for all products  Limitations Exposed to market forces Less control over subcontractors than in-house

13-30 External Environment & Structure Dynamic High rate of change Use team-based, network, or other organic structure Stable Steady conditions, predictable change Use mechanistic structure Complex Many elements (such as stakeholders) Decentralize Simple Few environmental elements Less need to decentralize

13-31 Diverse Several products, clients, regions Use divisional form aligned with the diversity Hostile Competition and resource scarcity Use organic structure for responsiveness Integrated Single product, client, place Use functional structure, or geographic division if global Munificent Plenty of resources and product demand Less need for organic structure External Environment & Structure (con’t)

13-32 Effects of Organizational Size As organizations grow, they have:  More division of labor (job specialization)  Greater use of standardization  More hierarchy and formalization  More decentralization

13-33 Technology and Structure  Technology refers to mechanisms or processes by which an organization turns out its product or service  Two contingencies: Variability -- the number of exceptions to standard procedure that tend to occur. Analyzability -- the predictability or difficulty of the required work

13-34 Organizational Strategy  Structure follows strategy Strategy points to the environments in which the organization will operate Leaders decide which structure to apply  Innovation strategy Providing unique products or attracting clients who want customization  Cost leadership strategy Maximize productivity in order to offer competitive pricing

Organizational Culture McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

13-36 Facebook’s Organizational Culture Facebook has been able to maintain a strong corporate culture even as it expands globally. “Maintaining culture is one of the top priorities we have as a company,” says Sarah Smith (shown in this photo), head of Facebook’s operations in Austin, Texas.

13-37 Organizational Culture Defined  The basic pattern of shared values and assumptions shared within the organization.  Defines what is important and unimportant.  Company’s DNA—invisible, yet powerful template that shapes employee behavior

13-38 Elements of Organizational Culture Organizational culture Artifacts of organizational culture 14-38

13-39 Content of Organizational Culture  The relative ordering of values. A few dominant values Example: Facebook – creative, proactive, risk-oriented  Problems with measuring org culture Oversimplifies diversity of possible values Ignore shared assumptions Adopts an “integration” perspective  An organization’s culture is fuzzy: Diverse subcultures (“fragmentation”) Values exist within individuals, not work units

13-40 Organizational Culture Profile Org Culture DimensionsDimension Characteristics Innovation Experimenting, opportunity seeking, risk taking, few rules, low cautiousness Stability Predictability, security, rule-oriented Respect for people Fairness, tolerance Outcome orientation Action oriented, high expectations, results oriented Attention to detail Precise, analytic Team orientation Collaboration, people-oriented Aggressiveness Competitive, low emphasis on social responsibility Source: O’Reilly et al (1991)

13-41 Organizational Subcultures  Dominant culture -- most widely shared values and assumptions  Subcultures Located throughout the organization Can enhance or oppose (countercultures) firm’s dominant culture  Two functions of countercultures: provide surveillance and critique, ethics source of emerging values

13-42 Artifacts: Stories and Legends  Social prescriptions of desired (or dysfunctional) behavior  Provides a realistic human side to expectations  Most effective stories and legends: Describe real people Assumed to be true Known throughout the organization Are prescriptive

13-43 Artifacts of Organizational Culture Observable symbols and signs of culture Physical structures, ceremonies, language, stories Maintain and transmit organization’s culture Need many artifacts to accurately decipher a company’s culture

13-44 Artifacts: Rituals and Ceremonies  Rituals programmed routines (e.g.., how visitors are greeted)  Ceremonies planned activities for an audience (e.g.., award ceremonies)

13-45 Artifacts: Organizational Language  Words used to address people, describe customers, etc.  Leaders use phrases and special vocabulary as cultural symbols  Language also found in subcultures

13-46 Artifacts: Physical Structures/Symbols Building structure -- may shape and reflect culture Office design conveys cultural meaning Furniture, office size, wall hangings Courtesy of Microsoft Corp.

13-47 Organizational Culture Strength  How widely and deeply employees hold the company’s dominant values and assumptions  Strong cultures exist when: most employees understand/embrace the dominant values values and assumptions are institutionalized through well-established artifacts culture is long lasting -- often traced back to founder

13-48 Functions of Strong Corporate Cultures Functions of Strong Cultures Control system Social glue Sense-making Control system Social glue Sense-making Organizational Outcomes Org performance Employee well-being Org performance Employee well-being Culture strength advantages depend on: Environment fit Not cult-like Adaptive culture Environment fit Not cult-like Adaptive culture

13-49 Contingencies of Organizational Culture & Performance  Organizational culture strength moderately predicts organizational performance  Need to consider contingencies: 1. Ensure culture-environment fit 2. Avoid corporate “cult” strength 3. Create an adaptive culture

13-50 Organizational Culture Assimilation in the Southwest--AirTran Merger Organizational culture assimilation practices helped AirTran Airways employees understand and embrace the Southwest Airlines culture, known as the “Southwest Way.” Southwest’s success and its popular culture assisted this assimilation process.

13-51 Merging Cultures: Bicultural Audit  Part of due diligence in merger  Minimizes cultural collision by diagnosing companies  Three steps in bicultural audit: 1. Identify cultural artifacts 2. Analyze data for cultural conflict/compatibility 3. Identify strategies and action plans to bridge cultures

13-52 Merging Organizational Cultures Assimilation Deculturation Acquired company embraces acquiring firm’s cultural values Acquiring firm imposes its culture on unwilling acquired firm Integration Cultures combined into a new composite culture Separation Merging companies remain separate with their own culture

13-53 Changing/Strengthening Organizational Culture

13-54 Changing/Strengthening Organizational Culture  Actions of Founders/Leaders Org culture sometimes reflects the founder’s personality Transformational leaders can reshape culture -- organizational change practices  Aligning Artifacts Artifacts keep culture in place e.g., create memorable events, communicating stories, transferring culture carriers

13-55 Changing/Strengthening Organizational Culture  Introducing Culturally Consistent Rewards Rewards are powerful artifacts – reinforce culturally-consistent behavior  Attracting, Selecting, Socializing Employees Attraction-selection-attrition theory Socialization practices

13-56 Attraction-Selection-Attrition Theory  Organizations become more homogeneous (stronger culture) through: Attraction -- applicants self-select and weed out companies based on compatible values Selection -- applicants selected based on values congruent with organization’s culture Attrition -- employees quit or are forced out when their values oppose company values

13-57 Lindblad’s Shipshape Socialization As part of its socialization process, adventure cruise company Lindblad Expeditions shows applicants a video program with a realistic preview of what it’s like to work onboard.

13-58 Organizational Socialization Defined The process by which individuals learn the values, expected behaviors, and social knowledge necessary to assume their roles in the organization.

13-59 Socialization: Learning & Adjustment  Learning Process Newcomers make sense of the organization’s physical, social, and strategic/cultural dynamics  Adjustment Process Newcomers need to adapt to their new work environment - New work roles - New team norms - Newcomers with diverse experience adjust better

13-60 Stages of Socialization Role Management Insider Changing roles and behavior Resolving conflicts Insider Changing roles and behavior Resolving conflicts Encounter Stage Newcomer Testing expectations Newcomer Testing expectations Pre-Employment Stage Outsider Gathering information Forming psychological contract Outsider Gathering information Forming psychological contract

13-61 Improving Organizational Socialization  Realistic job preview (RJP) A balance of positive and negative information about the job and work context  Socialization agents Supervisors – technical information, performance feedback, job duties Co-workers – ideal when accessible, role models, tolerant, and supportive